Automotive Services International Ltd (ASI)

Where total cost of ownership has long favoured EVs over their ICE counterparts, public perception is naturally drawn to upfront monthly cost. At ASI we have observed how Q2 has signalled all but the end of this disparity, with the average EV now only £5/month more than for a car with a combustion engine. Much has been made of the need for price parity to drive EV sales, but it must be noted that EV share remains fairly flat, at around the 16% mark. These figures suggest that the public's decision to switch technologies is far more nuanced than pricing alone. It would appear that the industry will be forced into a rethink of how they pitch the benefits of EV ownership.

Where total cost of ownership has long favoured EVs over their ICE counterparts, public perception is naturally drawn to upfront monthly cost. At ASI we have observed how Q2 has signalled all but the end of this disparity, with the average EV now only £5/month more than for a car with a combustion engine. Much has been made of the need for price parity to drive EV sales, but it must be noted that EV share remains fairly flat, at around the 16% mark. These figures suggest that the public's decision to switch technologies is far more nuanced than pricing alone. It would appear that the industry will be forced into a rethink of how they pitch the benefits of EV ownership.

News is rife on EV affordability right now and ASI have the facts for you; Considering the ubiquitous PCP retail channel, we can observe that an EV will set the consumer back 25% more per month than its ICE counterpart. Although we can see that the gap has closed relative to the latter part of 2022/early 2023, it has yet to return to the 22% gap we saw in early 2022. And with EV share currently sitting at 16% (SMMT source) for the year, we watch with interest to see how this plays out in light of the 22% ZEV mandate targets.

The 'ZEV effect' - how brands have reacted to Government targets on EV sales. While there is an industry expectation that in order to meet the mandated mix of 22%, that EVs will find homes via fleet channels, ASI have also observed a sizeable uplift in support via retail channels. With a number of brands still below the 2024 threshold, it is likely that this upward trend continues in Q2 and beyond

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With the 22% mandated EV mix currently at odds with public appetite to trade in their oil burners, it is of little surprise to see that 9 out of 10 of the most competitive PCP offers now belong to BEVs. At ASI we offer a holistic view on PCP competitiveness, taking into account APRs, associated discounts (FDAs) and Guaranteed Future Values

Affordability of Electric Vehicles in the retail sector is underpinned by monthly payments, be it via PCP finance, personal contract hire, or subscription services. Aside the purchase price and lender’s interest rates, the forecast residual value, (or ‘Guaranteed Future Value’ in the case of PCP) of the vehicle is integral to calculating the costs for each of the aforementioned channels. During these early days of high R&D costs, EV list prices are inevitably higher than those of their well-developed fossil fueled cousins. Hence the call from manufacturers for a return of Government backed support, in the form of grants towards the purchase price and installation free home chargers. The chancellor decided to ignore these calls and instead support a continued reduction to duty at the pumps. If we then add a delayed ban on ICE cars (to 2035) and a good dose of negative press on EVs, public appetite is dwindling at exactly the same time as manufacturers are being mandated to sell a minimum sales mix of 22% EVs. While Fleet EV sales are relatively buoyant (due to tax efficiencies), margins for the brands are lean, while finding second owners in used retail sector for these cars is causing headaches for brands and dealers alike. The net effect is that residual values have been recalculated, with fleet operators being reimbursed for losses and retail GFVs in decline. There is a high likelihood that these forecast residuals are being ‘propped-up’ against an even harsher RV reality. Thus, despite 0% finance and large FDAs now commonplace on EVs, monthly payments remain high. And the snowball continues! #sustainability #greenenergy #zev FairCharge

The calls for a reintroduction of Government backed BEV grants and/or a VAT reduction on public charging fell on deaf ears this week. But, with BEV sales faltering, VMs are going to come under increasing pressure to meet the mandated 22% target.

2024s ZEV mandate has redoubled VM efforts in calling for the Government to reintroduce funding to help stimulate demand for BEVs in the retail sector. At ASI we have observed how there are three distinct sub sectors. In H2-2023 the premium German brands are already well placed to meet the target of 22% BEV mix. MG, with help from Chinese Government subsidies are gaining a strong foothold at the other end of the affordability scale. It is the traditional volume players who will be most vocal in support of a tax reduction on BEVs. But, with a general election approaching, this could well fall on deaf ears. 

2024s ZEV mandate has redoubled VM efforts in calling for the Government to reintroduce funding to help stimulate demand for BEVs in the retail sector. At ASI we have observed how there are three distinct sub sectors. In H2-2023 the premium German brands are already well placed to meet the target of 22% BEV mix. MG, with help from Chinese Government subsidies are gaining a strong foothold at the other end of the affordability scale. It is the traditional volume players who will be most vocal in support of a tax reduction on BEVs. But, with a general election approaching, this could well fall on deaf ears.